2017年-世界发展银行全球_Brazil_Financial_Intermediation_Costs_and_Credit_Allocation_41页_1mb

Summary of Brazil Financial Intermediation Costs and Credit Allocation

Core Content

This discussion paper examines the Brazilian financial intermediation system, focusing on earmarked credit—a form of credit directed to specific sectors or activities through various government interventions and central bank regulations. The paper explores the funding sources, costs, beneficiaries, and implications of these credit programs on capital allocation, intermediaries, and monetary policy transmission.

Main Findings

1. Size and Trends of Earmarked Credit

• Earmarked credit accounted for about half of total credit in Brazil at the end of 2015, up from one third in 2007.
• Since 2008, it has grown from 32% to 49% of total credit.
• The increase was initially attributed to the global financial crisis and credit constraints, but continued even after the commodity boom.

2. Funding Sources for Earmarked Credits

• Savers contribute 40% of earmarked credit funding (13% of GDP), primarily through tax-exempt instruments and deposits.
• Employees fund 12% of earmarked credit (4% of GDP) through monthly salary deductions to the Severance Indemnity Fund (FGTS), which earns very low returns (4.8% in 2015).
• The fiscal sector accounts for 48% of earmarked credit funding (15% of GDP), mainly through direct lending to BNDES (9% of GDP) and special/constitutional funds (6% of GDP, excluding FGTS).

3. Costs of Earmarked Credits

• The fiscal cost of earmarked credit in 2015 was 3.7% of general government revenue or 1.5% of GDP.
• These costs include explicit subsidies (e.g., interest rate equalization) and implicit subsidies (e.g., under-remuneration of deposits and forced savings).
• Savers and employees each contribute 0.3% of GDP to lowering interest rates on earmarked credit.
• BNDES alone accounts for R$285 billion in lending to public and private commercial banks for earmarked projects.

4. Beneficiaries of Earmarked Credits

• Firms in services, rural, and energy sectors are the main beneficiaries, with larger, older, and less risky firms benefiting more.
• Households receiving rural credit and mortgage loans enjoy large subsidies.
• Non-earmarked credit is dominated by working capital (46% of total non-earmarked credit), while earmarked credit is more focused on infrastructure, development, and housing.
• Earmarked loans have interest rates significantly lower than non-earmarked loans, with an average of 10% versus over 40% for non-earmarked loans.

5. Intermediation of Earmarked Credits

• Government-owned banks and largest private banks dominate the market.
• BNDES accounts for 72% of earmarked firm credit, directly and through on-lending.
• Non-earmarked credit generates 82% of nominal interest income, despite accounting for only 50% of total credit.
• Monetary policy transmission is affected, with policy rate changes needing to be larger to have the same impact due to the presence of regulated rates.

Key Implications

1. Capital Allocation

• Earmarked credit has led to uneven capital allocation, with high social return sectors not being the main beneficiaries.
• Publicly traded firms show insignificant investment responses to earmarked credit.
• Smaller firms benefit most from interest rate differentials.

2. Impact on Intermediaries

• Banks make small profits on directed credits and compensate with higher rates on non-earmarked credits and fee income.
• Central Bank regulations have created distortions in the credit market and policy transmission.

3. Monetary Policy Transmission

• The presence of regulated rates and forced savings affects the effectiveness of monetary policy.
• SELIC rate changes need to be larger to achieve the same impact due to the subsidized rates in earmarked credit.

Policy Implications

• The large fiscal cost and limited evidence of positive impact suggest the need for a comprehensive evaluation of the program.
• Policy options include:
  • Clarifying objectives and beneficiaries of earmarked credit schemes.
  • Developing a results framework to assess the effectiveness of these programs.
  • Enhancing transparency and monitoring to improve accountability.
  • Increasing public awareness and discussing reform needs.
  • Adjusting the speed and sequencing of reforms depending on the scheme.

Conclusion

Earmarked credit has become a major component of Brazil's financial system, with significant fiscal and social implications. While it aims to support specific sectors and groups, the high costs, uneven allocation, and distortions in monetary policy raise concerns about its efficiency and sustainability. A reform-driven approach is necessary to ensure that the system continues to serve its intended purpose effectively.